Airlines are passing fuel savings on to shareholders, not customers

After three airlines reported earnings Thursday, one thing is clear: the recent drop in oil prices has been a boon for the airline industry.

Southwest LUV, for one, noted on its earnings call that, given expected market prices for aviation fuel and already in-place derivative contracts, it would save around $500 million year-over-year in the first quarter alone. Rival United UAL reported that it saw the price of fuel drop nearly 15% in the fourth quarter of 2014, and more than 5% for 2014 as a whole, representing $670 million in savings for the airline compared with 2013. Alaska Airlines ALK, a smaller carrier based near Seattle, said it spent 13% less on fuel in the quarter and 3% less for the full year.

There have been a few isolated attempts to give customers a break. Earlier this month, Alaska offered a 20% savings for customers who put in the promo code “FUELSAVINGS” when purchasing a ticket.

Customers who own airline stocks could see some benefit, however. Airline stocks should start to gain altitude as a result of the airlines’ fuel savings, said JPMorgan analyst Jamie Baker.

“The market is only putting a fraction of value on these fuel savings,” he told CNBC Thursday, adding that, despite a healthy 2014, the biggest U.S. carriers could still see “market trouncing returns.”

Delta expects an additional $2 billion in fuel savings this year

Delta Air Lines says it could see savings of more than $2 billion in 2015 over last year’s levels, citing lower fuel prices as a factor that can help the airline book double-digit earnings growth for the upcoming year.

Airlines like Delta DAL are seen as one of the greatest beneficiaries of tumbling oil prices in recent months, as fuel is a great cost to the industry. Some publications, such as The Wall Street Journal, have begun to speculate U.S. airlines could use the fuel savings to pay down debt or reward shareholders with stock repurchases. Meanwhile, some politicians are calling on an investigation as to why plane tickets are still so high despite the steep drop for the price of fuel.

Delta’s latest results indicate it is a mixed blessing. The company’s fourth-quarter results for 2014 came with a $1.2 billion charge tied to fuel hedging. That charge led Delta to book a $712 million loss for the period. But excluding those hedging adjustments, Delta said fuel expenses tumbled $342 million, driven by lower market prices and higher refinery profits.

Delta is also seeing a tailwind to the upcoming fuel savings it will see this year.

“We expect a net year-over-year fuel price benefit of $500 million in the March quarter and will work throughout 2015 to maximize the benefit of fuel savings to our bottom line,” said Chief Financial Officer Paul Jacobson.

Delta is also in an unusual position because it has owned a Pennsylvania refinery since 2012, a move the company made to help it navigate turbulent swings in fuel prices. Operations at the refinery produced a $105 million profit for the latest quarter. Delta’s refinery primarily provides jet fuel for the benefit of the airline, though the company sells fuel by-products to third parties from time to time.

And beyond the fuel benefits, Delta and other airlines are aided by more demand for travel. Overall revenue climbed 6% to $9.65 billion, bolstered by a 4% increase in traffic on a 3.7% increase in capacity.

Davos and tons of tech — five things to watch for in the week ahead

This was a busy week with earnings beginning to pour in, including from some of the biggest banks. JPMorgan JPM, Wells Fargo WFCNP, Bank of America BOFA and Citigroup C, all reported. It was also the kick off to the North American International Auto Show in Detroit.

The four-day work week ahead is even more packed (happy Martin Luther King Day on Monday!). A slew of earnings are scheduled from tech companies you’ve probably heard of, along with Starbucks and McDonald’s. The World Economic Forum in Davos also gets going with its usual mix of glitz and worry over various global crisis.

Here’s what you need to know for your week ahead.

1. Greetings from Davos!

Check Fortune.com regularly to get smart takes from Fortune’s Stephen Gandel and Editor Alan Murray, who will be reporting from the World Economic Forum in Switzerland. The event will start Wednesday and run through Saturday. You can count on heads of state, global financial leaders and tech moguls to be out in full force. In theory, the gathering is for improving the world through public-private cooperation. In practice, it’s a big business mixer.

2. Some big name tech companies report earnings

A number of tech companies report earnings this week. Starting things off Tuesday is Netflix NFLX and IBM IBM. Next up Wednesday afternoon is eBay EBAY. Verizon VZ carries the flag for telecom companies on Thursday.

3. The latest from Windows

It may not generate quite the same fanfare as Apple’s AAPL huge events, but Microsoft MSFT will get some headlines Wednesday when it unveils its latest about the Windows 10 operating system. Xbox’s chief Phil Spencer will be speaking, so you can also expect some gaming news to come out of the presentation. Terry Myerson and Joe Belfiore, two Windows Operating Systems Group execs, will also be there.

4. Top food companies will also be reporting

Starbucks SBUX and McDonald’s MCD, two of the most prominent U.S. restaurant companies, will put out their earnings this week. Starbucks will report first on Thursday evening. Meanwhile, McDonald’s will take center stage Friday morning.

5. Can’t forget about oil

This will be an important week for oil company watchers, who have a number earnings to look for amid sinking crude prices. On Tuesday, look out for oil services firms Baker Hughes BHI and Halliburton HAL. Energy companies have been forced to slash jobs and stop drilling. It will also be an opportunity to see how companies that are closely tied to oil prices like Delta Air Lines DAL are doing with the vastly lower fuel prices. Delta’s earnings will be Tuesday morning.

New ‘basic’ airline ticket is worse than any low-fare carrier option

This post is in partnership with Money. The article below was originally published at Money.com.

By Brad Tuttle, Money

Earlier this week, Delta announced that it is “redefining the products it offers customers to further distinguish the choices available to them,” with the 2015 rollout of a five different categories of service (and pricing) that passengers must choose from when buying flights.

Essentially, the more you pay, the better service and amenities you can expect. This is more or less the way things have always been with airline pricing. Yet the introduction of five flight categories—including “First Class” and an even higher class dubbed “Delta One,” as well as something called “Delta Comfort+” and “Main Cabin,” which used to be known as “Economy” or just coach—is unnecessarily confusing, and it certainly raises the bar in terms of instituting an onboard caste system. More importantly, Delta is flying into new territory at the low end of pricing, with the cheapest category providing the least flexible and least comfortable product of any American carrier.

“We’re providing Delta customers with a thoughtful, well-defined spectrum of options as they make decisions about travel,” Glen Hauenstein, the airline’s executive vice president and chief revenue officer, said in a press release. “Whether a customer prioritizes the perks of Delta One or the value of Basic Economy, every seat comes with impeccable service and unmatched reliability.”

Still, some travelers will be very surprised to find out what a Basic Economy seat comes without. Delta first began testing its low-price Basic Economy fare back in 2012 on a couple of flights. What stood out then about this low-fare option—and what remains unusual even in today’s profit-first, customers-last atmosphere—is how rigid and cruel it is. Neither advanced seat selection nor itinerary changes are allowed, not even for an extra fee. So this low-cost option is out of the question for couples or families who want to be assured they’ll sit together when flying. Also, because anyone not flying on a Basic Economy ticket has the right to arrange a seating assignment in advance, in all likelihood the passengers traveling on the cheapest tickets will be stuck in the worst seats on the plane. What’s more, because changes and cancellations are not possible under any circumstances, if an emergency arises and you must miss a scheduled flight, you’ll eat the entire cost of the ticket.

Today, Delta’s Basic Economy category is available from four Delta hubs (Atlanta, Detroit, Minneapolis, Salt Lake City) and 33 gateways, and it’s about to get more restrictive. Delta explained that as of February 1, several services that are currently available to Basic Economy ticketholders will be eliminated. These services include complimentary or paid upgrades, same-day standby, and priority boarding for a purchase.

It’s well understood that Delta introduced and expanded its Basic Economy category as a way to compete with Spirit Airlines, the much-maligned carrier that’s known for low fares followed by high fees for anything above the cost of a seat. Yet even the cheapest seats sold by Spirit Airlines, as well as low-fare, high-fee imitators such as Frontier Airlines, allow customers to pay extra for seating assignments and the right to change flight dates and itineraries. Frontier and Spirit also offer passengers the option of paying extra for upgrades, in the form of seats that may be larger or just come with more legroom.

The fare structures of Delta, Spirit, and all other airlines are meant to simultaneously attract customers and boost revenues. It’s just that some airlines go about seeking these goals in different ways. Spirit and Frontier are working the a la carte model, in which customers are wooed with a low upfront price, and then hopefully they’re upsold on a bunch of services later in the game. Delta’s new five-tiered model instead wants to get most of the upselling accomplished during the ticket purchase phase. The hope is that customers are so scared off by the absence of getting an advance seat, upgrade, or the option to change a flight that they’ll readily pay more upfront.

One way or another, there’s some upselling going on, and it’ll be difficult, uncomfortable, and often just plain impossible for travelers to actually complete a flight without paying above the base fare. A Delta spokesperson told Businessweek that the Basic Economy category could expand to more cities next year. And judging by the way that Spirit Airlines and its fee-crazed equivalent in Europe, Ryanair, have proven to be not only highly profitable operations but also industry trendsetters, more and more airlines are likely to follow in its a la carte, fees-for-everything footsteps. So, one way or another, when buying a ticket, when checking in, or during the flight itself, travelers should expect to pay more.

Airline stocks lose altitude on fresh Ebola fears

U.S. airline stocks extended their descent on Wednesday as reports surfaced that a woman infected with the Ebola virus had flown on a Frontier Airlines flight earlier this week.

The sector has suffered notable declines since Sept. 30, the day a Liberian man was diagnosed with the disease after he flew to the United States from West Africa. Since then, the CDC has confirmed that two healthcare workers in Texas who provided care for the patient have tested positive for Ebola.

Those concerns have led some investors to worry about how airline traffic may be affected if consumers start to worry about flying to Dallas, or other parts of the country if the disease were to spread. Already, officials have asked 132 people who flew with the infected Dallas health-care worker on a Frontier Airlines flight from Cleveland to Dallas to contact the Centers for Disease Control.

All major airline stocks have posted a decline from Sept. 30 through Oct. 14, according to FactSet Research. Spirit Airlines SAVE has posted the largest drop, with shares falling nearly 20% over that time period. Southwest Airlines LUV shares have skidded 11%, while shares of Delta Air DAL are down 9.3%. United Continental UAL fell 7.7% and Republic Airways RJET dropped 4%.

A majority of airlines, including Southwest, Delta and United Continental, are performing worse than the Dow Jones industrial average, which over that period reported a 4.4% drop.

Those declines continued on Wednesday, with nearly all airline stocks falling along with the broader market.

Delta tops the list of the best airlines in the U.S.

A new study shows that United ranks as the overall worst performing airline in the U.S. for the third year in a row, but Delta DAL is top of the list when it comes to such metrics as fewest cancelled flights, most on-time arrivals and the least number of mishandled bags.

The report, compiled by Airfarewatchdog, a website that provides data about the airline industry for consumers, gathered its figures from the Department of Transportation’s May 2014 study on the industry.

“As far as we’re concerned, Delta is this year’s unsung hero,” Airfarewatchdog said in a post announcing the results. “For the past two years, Delta has been stuck on the wrong side of the rankings, but this year the airline moved from sixth up to the top spot!”

The number two spot, meanwhile, belongs to Virgin America, which maintained its runner-up position from 2013.

Delta shot up the rankings from last year’s study on the heels of a strong performance in a number of categories. For example, the airline saw only 0.11% of its flights cancelled to finish as the best in the U.S. in that category, compared with JetBlue’s JBLU 2.42% cancellations. Delta also scored a particularly strong showing in the on-time arrival department, with 84.41% of its flights landing when expected (the second best after Alaska’s 89.67%).

In the case of fewest mishandled bags, Virgin America was best in show, with just 1.04 mishandled out of 1,000 passengers. The worst performer? AirTran, which had 4.91 mishandled, on average.

For amount of denied boardings per one million passengers, according to statistics compiled by the Department of Transportation, JetBlue had just 3.58 denied to claim the number-one position, whereas United was last with 245.61 denied entry on the plane.

The final category, customer satisfaction scores, featured JetBlue as the highest performer with a score of 79, according to the 2014 American Customer Satisfaction Index scores. United UAL finished number eight in the category with a mark of 60.

United Airlines overhauls its frequent-flier program

Frequent travelers on United Airlines UAL will soon earn rewards based on the amount of money they spend on tickets, rather than on the distance they travel.

The airline has announced plans to change its MileagePlus frequent-flier program next year, altering the way members earn award miles. Starting March 1, 2015, United will award members with miles based only on the price they pay for tickets, rather than on the cumulative distance they’ve traveled. The airline said the new rule will take into account both the base fare for a ticket as well as carrier-imposed surcharges.

MileagePlus members will earn at least five miles for every dollar they spend, with Premier members earning anywhere from 7 to 11 miles per dollar spent, depending on their membership status. Members will still be able to qualify for Premier status through a combination of distance-traveled and spending thresholds. The airline said members can earn a maximum of 75,000 award miles per ticket purchase.

“These changes are designed to more directly recognize the value of our members when they fly United,” said Thomas O’Toole, president of United’s MileagePlus program.

United also said that next year it will offer new ways for frequent-fliers to use their award miles, including on certain types of seat upgrades and checked-baggage subscriptions.

While multiple low-cost airlines already offer similar fare-based programs, United is the latest of the large carriers to go that route. Delta Air Lines DALannounced in February that its SkyMiles program would start basing frequent-flier miles on how much travelers spend on tickets. The changes to Delta’s program will go into effect at the start of 2015.